The International Trade Commission has established new regulations governing the consideration of public interest factors when investigating allegations of unfair competition and/or infringement. Under the new regulations, a respondent in a case before the ITC has only eight days to file a pleading that could affect the outcome of the case. This requires lightning-fast coordination with outside counsel and amici to capitalize on one of the latest opportunities afforded to respondents by the ITC.
About the ITC and Section 337
The ITC is an independent federal agency charged with investigating unfair foreign competition against U.S. domestic industry and where, as appropriate, imposing remedies to protect the U.S. industry. The primary remedy of a Section 337 proceeding at the ITC is an exclusion order preventing the importation of accused products.
There are two types of exclusion orders. A limited exclusion order prohibits the importation of goods from named respondents or their affiliates. A general exclusion order prohibits the importation of all goods that infringe a patent irrespective of the source. The secondary remedy at the ITC is a cease-and-desist order to cease and desist from engaging in the unfair method or methods or acts involved.
One of the statutory regimes administered by the ITC is Section 337 of the Tariff Act, 19 U.S.C. § 1337. Section 337 creates an administrative judicial proceeding governed by the Administrative Procedures Act and ITC regulations. The Section 337 proceeding evaluates allegations of unfair competition, principally in the intellectual property arena.
Historical Public Interest Factors at the ITC
There is an exception for Section 337 remedies where the ITC, after considering the public health and welfare, competitive conditions in the U.S. economy, the production of like or directly competitive articles in the U.S., and U.S. consumers, finds that infringing articles should not be excluded.1 These are often referred to as the "public interest factors."
The ITC has relied upon the public interest factors to deny issuance of an exclusion order in three cases.2
Historically, the ITC has not denied relief based upon the public interest factors because it has interpreted the legislative history of Section 337 to mean that it should only deny relief when the adverse effect on the public interest factors would be greater than the interest in protecting the patent holder.3
Public interest factors, however, are now becoming an increasingly important theater of conflict in Section 337 investigations with the ITC and litigants showing heightened interest in exploration.4
New Public Interest Regulations
The ITC began to promulgate additional public interest regulations in 2010.5The purpose of this exercise was to "gather information on the public interest at an earlier stage in the investigation, and to aid the commission in determining when to delegate part of the development of the record on the public interest to the administrative law judge."6
The ITC always had the responsibility for consideration of this information,7 but the means to obtain it were less well defined. The final regulations became effective Nov. 18, 2011.8 They address new procedures for complainants, respondents and the adjudication itself.
Concurrently with filing the complaint, a complainant must file a separate public interest statement not more than five pages in length that addresses the public interest factors.9
In particular, the statement should:
- Explain how the articles potentially subject to the requested remedial orders are used in the United States.
- Identify any public health, safety or welfare concerns relating to he requested remedial orders.
- Identify like or directly competitive articles that could replace the subject articles made by complainant or its licensees.
- Indicate whether the complainant or its licensees have the capacity to replace, within a commercially reasonable time, the volume of articles subject to the requested remedial orders.
- State how the requested remedial orders would affect consumers.10
The 8-Day Limit for Responses
When a new complaint is filed, the ITC will publish a notice in the Federal Register inviting comments on the public interest from the public and proposed respondents.11 These comments should address the same five factors complainants discuss in their required public interest statement.12 These submissions by the public and respondents are due within eight calendar days after the publication of the notice in the Federal Register.13
Based upon an evaluation of the public interest submissions by the complainant, the public and the respondents, the ITC will determine whether to delegate the taking of public interest information to the administrative law judge.14
If the ITC does delegate that function to the ALJ, the regulations specify that he or she shall take evidence on it and include it as part of his or her recommended determination.15
"[W]hen directed to consider the public interest, the ALJ is expected to limit public interest discovery appropriately, with particular consideration for third parties, and not allow such discovery to delay the investigation or be used improperly."16 The ALJ may not take discovery on the public interest factors without the express order of the ITC.17 If the ITC orders the ALJ to take public interest evidence, the respondents must submit a public interest statement analogous to the one required of the complainant.18
Filing a public interest statement during the first eight days, thus, is critical for a respondent. If the respondent can enlist the filing of such a statement by amici, such as trade associations, academics or customers, all the better. This represents the one opportunity for respondents to convince the ITC to delegate pubic interest considerations to the ALJ and, thereby, give these considerations the potential for even broader applicability during the investigation.
Within 30 days of issuance of the ALJ's recommended determination, the parties "are requested" to submit a public interest statement to the ITC.19
Although not explicitly provided for in the new regulations, the ITC has stated that it will issue a notice in the Federal Register soliciting comments from the public after the ALJ issues the recommended determination.20
Public Interest Factors and Presidential Review
Even if a respondent is unsuccessful in prevailing upon the ITC to deny relief based upon the public interest factors, it will have a second opportunity to avoid relief based upon public interest factors during the presidential review phase.
Following a final ITC determination to grant relief, there is a 60-day period during which the executive branch may disapprove the decision for "policy reasons,"21which has been essentially construed to be without limitation.22 The ITC's decision becomes final absent disapproval.23 There have been executive disapprovals in five instances.24
While the statute vests this power with the president, it has since been delegated to the U.S. trade representative by assignment.25
The presidential review process with the U.S. trade representative is an opportunity for classical lobbying efforts by adversely affected respondents. The public information developed during the adjudicative process provides a basis for the lobbying.
Conclusion
Injecting public interest in the investigation at the ALJ level is a virtually risk-free proposition for respondents. It provides an opportunity to marshal additional arguments against relief that otherwise may be given less attention during the investigation. The most effective way to achieve this end is by acting within days of the filing of the complaint. In-house counsel must be prepared to make immediate decisions upon notification of the filing of a new case in order to ensure that this opportunity is not wasted.
Footnotes
1.19.S.C. §§ 1337(d)(1) (exclusion orders) and 1337(f) (cease-and-desist orders).
2.Spansion Inc. v. Int'l Trade Comm'n, 629 F.3d 1331, 1360 (Fed. Cir. 2010) (citing Certain Fluidized Supporting Apparatus and Components, Inv. No. 337-TA-182/188, Comm'n Op. (October 1984) (denying exclusion order because domestic producer could not meet the demand for hospital burn beds within a reasonable time and there were no alternative sources of supply); Inclined Field Acceleration Tubes and Components, Inv. No. 337-TA-67, Comm'n Op. (December 1980) (overriding public interest in basic atomic research justified denying relief against imported acceleration tubes where domestic products were of lower quality than the imports); Certain Automatic Crankpin Grinders, Inv. No. 337-TA- 60, Comm'n Op. (December 1979) (exclusion order denied on public interest grounds because of overriding national policy in maintaining and increasing supply of fuel-efficient automobiles where the domestic industry alone was unable to meet that demand).
3.See, e.g., Certain Battery-Powered Toy Vehicles, Inv. No. 337-TA-314, Comm'n Op. at 11 (Int'l Trade Comm'n Apr. 10, 1991).
4.See generally, Samantha Yoon, New Interest in the Public Interest: Non-Practicing Entities and Non-Infringing Alternatives, XXXIV 337 Reporter 124 (Summer 2011).
5.See Notice of Proposed Rulemaking, 75 Fed. Reg. 60671 (Oct. 1, 2010).
6.Id.
7.See 19 C.F.R. § 210.50(a)(2).
8. 76 ed. Reg. 64803 (Oct. 19, 2011).
9.1 9F.R. § 210.8(b).
10.Id.
11.19F.R. § 210.8(c).
12.Id.
13.Id.
14. 76 ed. Reg. 64808 (Oct. 19, 2011).
15. 19 .F.R. § 210.50(b)(1).
16.76 ed. Reg. 64808 (Oct. 19, 2011).
17. 19 F.R. § 210.50(b)(1).
18. 19 F.R. § 210.14(f).
19. 19. F.R. § 210.50(a)(4).
20.76ed. Reg. 64807 (Oct. 19, 2011).
21.19.S.C. § 1337(j)(2).
22.Duracell Inc. v. U.S. Int'l Trade Comm'n, 778 F.2d 1578 (Fed. Cir. 1985).
23. 19 S.C. § 1337(j)(4).
24.Certain Dynamic Random Access Memories, Inv. No. 337-TA-242 (exclusion order found to be unnecessarily disruptive to trade in computers, fax machines, telecommunication switching equipment and printers); Certain Alkaline Batteries, Inv. No. 337-TA-165 (disapproval because the executive branch was reviewing its policy on gray-market importations); Certain Molded-In Sandwiched Panel Inserts, Inv. No. 337-TA-99 (disapproval based on concerns that the remedial orders may not be in compliance with General Agreement on Trade and Tariffs); Certain Multi-Ply Headboxes, Inv. No. 337-TA-82 (disapproval because broad exclusion order was found to be unnecessary where there were only three or four infringing products sold each year); Welded Stainless Steel Pipe and Tubes, Inv. No. 337-TA-29 (disapproval for detrimental effects on national economic interest, international economic relations of the U.S., need to avoid conflict of laws between trade and antitrust laws that might otherwise irritate trading partner, and probable lack of U.S. producers to fill the demand).
25. 70 Fed. Reg. 43251 (July 26, 2005).
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